Upside as Bitcoin Miners Lose $14B – Bitcoin Magazine
Public mining companies enter the final quarter of 2022 bruised and battered after nine months of bear market brutality. At the end of the 3rd quarter, the total market capitalization of all US-listed mining companies fell by more than $14 billion from the beginning of the year, according to data compiled by YCharts. Whether the end of the year will offer a respite for these companies is very much an open question as headwinds from macroeconomic turmoil seem unabated in the face of historic inflation and bewildering central bankers desperate for quick financial solutions. This article provides an overview of the decline in share prices for public mining companies as the final quarter of the year begins.
Summary of the mining market for 2022
Over half of the total $14 billion erased from the market capitalization of public mining companies is attributed to just five companies, according to data from YCharts: Core Scientific, Marathon, Riot, TeraWulf and Hut 8. The bar chart below visualizes each company’s change in total market capitalization since the beginning of 1st quarter to the end of the 3rd quarter this year.
This year, $14 billion has been wiped from the market capitalization of public bitcoin mining companies.
Compared to bitcoin itself, the losses for public mining companies are small. Since Jan. 1, bitcoin’s total market capitalization has fallen from $900 billion to less than $400 billion at the end of September, according to data from TradingView.
Readers should be aware that these charts only show public mining companies that trade on US markets, namely the Nasdaq, one of the most liquid and actively traded markets in the world. But other relatively high-profile public companies in non-US markets have also suffered significant losses, including Northern Data and Cathedra.
Any future price issues for mining companies depend entirely on bitcoin’s price. Mining stocks remain closely correlated to bitcoin’s price, as this author noted in a previous article for Bitcoin Magazine, and continue to underperform. The line chart below visualizes the stock prices of all the mining companies included in the previous bar chart priced in bitcoin since the start of the year.
Share prices of public bitcoin mining companies priced in bitcoin since the start of the year.
Bullish Hope Springs Eternal
Despite the fact that you are already one of them longest and the toughest bear markets in bitcoin’s history – especially for miners, as the difficulty continues to rise to new heights while the price continues to fall – there is still hope for the public mining sector in the long term.
First, as long as Bitcoin is bullish, bitcoin mining companies will also have a bright future despite periodic periods of bearish market conditions. Even if some mining companies fail, others will take their place.
For another, even the traditional financial analysts see the potential in the mining sector, with some analysts calling for “huge upside” among public miners, according to CoinDesk, and others praising the “fantastic” fundamentals of some miners. And these fundamentals – for many companies – continue to improve. In September alone, for example, CleanSpark bought a 36-megawatt site in Georgia, Aspen Creek raised $8 million to expand its solar extraction, Rhodium plans to go public, and mining veteran Jihan Wu created a $250 million fund for distressed mining operations. The mining sector is far from dead.
Opportunity From immaturity
In many ways, the last couple of years represented the very first market cycle for a significant portion of the mining market, and nothing goes well during the first time around a market’s ups and downs. Losses will be suffered, valuations will plummet and some companies will collapse completely.
But the winners always emerge from periods of market immaturity. And the immaturity of the public mining market is easy to see. For example, the prices of each mining stock continue to move almost in lockstep with bitcoin despite each company having vast differences in operational strategies, outstanding debt, number of machines online, and more. This shows that the market cares more about bitcoin’s price than the company’s fundamentals. But this immaturity also means that there is a huge upside for growth and maturation. If that isn’t reason enough to make you bullish on mining, nothing will be.
This is a guest post by Zack Voell. Opinions expressed are entirely their own and do not necessarily reflect the opinions of BTC Inc or Bitcoin Magazine.
